Debt has been a big part of my financial journey
Debt is a big part of my journey. Some people talk about good debt and bad debt. I don't really like labeling anything as good vs. bad. So I like talking about intentional debt. And when you make confident financial choices, debt can certainly get you closer to your Big Financial Goals (when you have the financial clarity on what those are).
Here are three stories about debt in my financial journey:
0% Interest for a Couch
As a recent college grad, I was #adulting - furnishing my first apartment, applying for my first credit cards, and learning some good #moneylessons
My roommate and I divided up the furnishing responsibilities. I bought the couch and love seat from Jennifers Convertibles for $1000 and signed up for their credit card to get 90 days of 0% interest.
I carefully budgeted to make three payments of $333.33 (+ 0.01). However, when I received the third bill in the mail, I learned my money mistake. 90 days is not 3 months! I was hit with a huge interest amount on my bill. I was overwhelmed, frustrated, and annoyed. In tears, I called my mom to tell her the whole story. She recommended that I call the credit card company and see my options.
After I composed myself and built up the #financialconfidence to make the call, I did it! I was able to make that third payment just ahead of the 90 days and avoid the interest payment. Phew.
I am grateful that my mom was on my Financial A-Team and a great, calm, experienced resource for me. Our financial journeys are a series of right-time, right-place money talks and I was grateful for that talk with my mom. It was also important to quickly take financial action so I had the best understanding of my options.
First Time Homebuyer
The first time you do anything, it’s feels uncomfortable. But with practice, you’ll find more Financial Confidence. Real estate is a big part of my financial journey. I purchased my first condo a year after graduating college and househacked (or rented out the spare bedroom).
Over the years, I have bought and sold a few house. And with practice I gain more confidence. I gain financial confidence in running the numbers of a good investment, understanding the risk that I’m taking on an investor, and making choices that align with my Big Financial Goals and values.
And debt has been a big part of that. In 2006, I was considering a move. I called my mortgage broker and he said, “the market is getting crazy with these no docs loan, interest only loans, and other products. Right now I could qualify you for a $400k loan.” I replied, I would only be able to make the first three mortgage payments before I tapped out my savings! He replied, “Oh, I don’t recommend you take that loan; I’m just sharing that you would qualify for that.”
It’s important to have people on your Financial A-Team that you can have the real conversations with so that you are making confident, aligned money choices.
Buying a Business with an SBA Loan
While real estate was a big part of my financial journey and wealth building strategy, I married a man that liked wealth building through owning and operating a business.
We bought a restaurant! There was a whole cycle of finding the business, buying the business, operating the business, and selling the business.
To purchase the business, we were able to acquire an SBA loan. It was an extensive application process and was worth all the effort in the end. We purchased the business for $200k with $50k down. The SBA recommended we take out a $250k loan which would include $50k of working capital...and we needed it. The business lost money in the first several months as we were making investments in the business.
And when the pandemic hit, there were special programs for businesses with an SBA loan, which helped keep us afloat.
We were able to fully repay the loan and receive some profit when we sold the business. But it would have been a long time and a lot of savings to purchase this business without debt.
Debt can be a great tool in your financial journey. Understanding your options, increasing your financial knowledge, finding opportunities to practice (aka starting small), and building your Financial A-Team will be valuable as you utilize debt in your financial journey.
Others live a debt-free life and have been working intentionally to get there.
Release the good vs. bad and explore how to make intentional confidence money choices.
